Meyer Appliance Company makes cooling fans. The firm's income statement is as follows: Sales (7,000 fans at
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Meyer Appliance Company makes cooling fans. The firm's income statement is as follows:
Sales (7,000 fans at $20) | $140,000 |
Less: Variable costs (7,000 fans at $8) | 56,000 |
Fixed costs | 44,000 |
Earnings before interest and taxes (EBIT) | $ 40,000 |
− Interest (I) | 10,000 |
Earnings before taxes (EBT) | $ 30,000 |
− Taxes (T) | 6,000 |
Earnings after taxes (EAT) | $ 24,000 |
Compute the following:
Degree of operating leverage.
Degree of financial leverage.
Degree of combined leverage.
The break-even point.
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